NWMLS: Seattle housing market shows no signs of slowing in August

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August market stats have been published by the NWMLS. Here’s a quick excerpt from their press release:

“For August, we experienced a more robust market than anticipated,” remarked Diedre Hanes, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynnwood. “Compared to years past, we’ve seen very limited slowdown,” she added.

“Nobody likes this market, – not sellers, not buyers, not real estate brokers,” proclaimed Northwest MLS director Dick Beeson. The reasons vary, he explained. “Sellers aren’t necessarily happy because they think they could be leaving money on the table. Buyers think they’re paying too much. And brokers think sales are more complex and fraught with peril than previously, making them harder to close.”

Beeson, the principal managing broker at RE/MAX Professionals in Gig Harbor, believes Seattle and surrounding areas are “forever changed” by this market. “The change isn’t going to be painless. Housing scarcity and increasing prices are sore spots.” Whether price increases will subside is anyone’s guess, he added.

Prices aren’t the only worry, suggested Haines. She said low appraisals occur on about one of every three sales. “The low appraisal number remains consistent at $25,000-to-$30,000 below sales price when it occurs. It makes one wonder why – coincidence or something else?” she stated.

Haines noted multiple offers are continuing, but added a note of caution to sellers: “Overpriced listings are not getting showings or offers. Buyers are well educated and well informed, which definitely eases fears of a developing bubble.”

“Everyone who is buying right now is so smart! What a great decision to buy a home in this market, no matter the price!” As if a home salesman is going to come out in a press release and suggest that buyers are ignorant and making stupid decisions. I’m not saying that’s the case for buyers today, but if it were, would agents ever say it? Of course not.

Now let’s dive into the numbers for August.

CAUTION

NWMLS monthly reports include an undisclosed and varying number of
sales from previous months in their pending and closed sales statistics.

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is favorable or unfavorable news for buyers and sellers (green = favorable, red = unfavorable):

August 2017 Number MOM YOY Buyers Sellers
Active Listings 2,820 -2.7% -17.5%
Closed Sales 2,797 +2.6% +0.3%
SAAS (?) 1.20 -5.7% -0.2%
Pending Sales 3,073 +4.2% -3.8%
Months of Supply 1.01 -5.1% -17.7%
Median Price* $650,000 -1.2% +18.2%

Every month I hope to see some good news for buyers in the numbers. Every month I am disappointed. Listings are still in short supply, sales are strong, and prices just keep going up at a breakneck pace. Sorry, buyers.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales increased three percent between July and August. Last year over the same period closed sales decreased half a percent. Year-over-year closed sales were up less than a percent.

King County SFH Pending Sales

Pending sales rose four percent from July to AUgust, and were down four percent year-over-year.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory

Inventory fell three percent from July to August, and was down seventeen percent from a year earlier.

Here’s the chart of new listings:

King County SFH New Listings

New listings were down five percent month-over-month, and up just slightly from last year.

Here’s the supply/demand YOY graph. “Demand” in this chart is represented by closed sales, which have had a consistent definition throughout the decade (unlike pending sales from NWMLS).

King County Supply vs Demand % Change YOY

Still the same story we’ve seen for a while. Great time to be a seller, terrible time to be a buyer.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Year-over-year price changes slowed just barely between July and August but still sit at a very high level.

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994 (not adjusted for inflation).

King County SFH Prices

Down slightly from July, but very close to the all-time high.

August 2017: $650,000
July 2007: $481,000 (previous cycle high)

Here’s the article from the Seattle Times: King County home prices surge 18 percent, most on record for this time of year


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

136 comments:

  1. 1
    Doug says:

    And 30y fixed mortgages are getting cheaper as I type.

  2. 2
    Jon says:

    And just like that Amazon announces the end of the bubble.

  3. 3
    Sid says:

    By Jon @ 2:

    And just like that Amazon announces the end of the bubble.

    Agreed.
    Long time bull here. I would be hesitant to invest in Seattle real estate anymore. This summer was best time to sell.

  4. 4
    ESS says:

    By Jon @ 2:

    And just like that Amazon announces the end of the bubble.

    I was wondering if the announcement would have some negative effect on the Puget Sound housing market. It may get some people wondering if the end is near.

    But some would say au contraire. I have not heard anywhere that Amazon is laying off Seattle employees, or they are reducing their expansion plans for Seattle already in the works. Which will result in an increase of up to 20K more employees in their Seattle location in the next few years. There is no change for Amazon and Seattle – other than the psychological effects of having to admit that Seattle will be a co number one, not number one.

    An Amazon optimist may view this as a good sign – that there won’t be any short term layoffs in Amazon in Seattle – but in fact they need to hire so many people that they can’t even accommodate all the required white collar workers in Seattle. Imagine our roads and infrastructure with 50K more workers in downtown Seattle , the highways would become permanent parking lots.

    It will be interesting to view where Amazon has headquarters number two, and how much they extract from the area they decide to go to. Those folks in potential Amazon headquarters number two better expect to open their wallets really wide. They will make Boeing and the 777 givebacks seem like child play. And it will be interesting to see how both the real estate and rental markets factor in this decision.

  5. 5
    Sid says:

    By ESS @ 4:

    By Jon @ 2:

    And just like that Amazon announces the end of the bubble.

    I was wondering if the announcement would have some negative effect on the Puget Sound housing market. It may get some people wondering if the end is near.

    But some would say au contraire. I have not heard anywhere that Amazon is laying off Seattle employees, or they are reducing their expansion plans for Seattle already in the works. ………………

    The negative effect will be reduced rate of appreciation. We will appreciate below national average going forward. I expect that existing and new Amazon employees will be given option to work for HQ1 or HQ2 and many new employees will choose HQ2 if housing costs are less. This is negative news – no way to sugarcoat it.

  6. 6
  7. 7
    GoHawks says:

    It would be nice if supply would uptick a little and demand decrease a little and we settle into a more normal market. Sellers can still sell, but buyers can buyer, and trade up/downsizers/first timers have options.

  8. 8
    Brian says:

    I think the market hype definitely will dampen a bit. Hype is what has been a big part of this spike – “buy now or get priced out by techies forever!” Seattle’s not Amazon’s only darling anymore and that thought will simmer in the minds of both home buyers and sellers.

    Amazon will need to pull workers from here to HQ2 for training and management. Not sure how many that would be or how quickly they would replenish them.

    Everett’s not going to happen – they want a metro area with a lot more population (ideally 1mill+). Perhaps Austin or even Detroit. Imagine the amount of land they could scoop up in Detroit.

  9. 9
    SS says:

    Whenever some negative news comes about the market . I see the Seattle times and Seattle bubble trying to cover with some news or post like this . May be I could be wrong?

  10. 10
    Spokant says:

    Amazon news is massive news because of how speculative the Seattle “boom” is. 50k high paying jobs (though “high paying” doesn’t mean jack anymore in this city) likely going to a new city is an actual and dynamic shift in economies.

    Doesn’t mean Seattle will tank; but the “boom” just changed dramatically.

  11. 11
    Erik says:

    RE: Brian @ 7
    Amazon is looking for tech people. If Amazon was a company that sexually abused children and smoked meth, Everett would be a great location for HQ2 because they could draw that hometown talent.

  12. 12
    Deerhawke says:

    I just went pending on a house I have been building in Tangletown and am glad this news came out 48 hours later. People might have spent a bit of time trying to figure out the ramifications and that might have caused some hesitation.

    But in a week, people will realize that this is really good for the Seattle market. We need something to take off a bit of the pressure. And I say this as a person who was a seller the last few months.

    Who knows where Amazon will build its other headquarters. I think after the last week, we can bet that Houston and Miami are off the list. And New Orleans is fun, but that is a no too.

    I really like Brian’s idea of Detroit, but there has to be an existing tech and financial infrastructure. You can bet that Austin, Denver, and Raleigh/Durham will be high on the list. Amazon could also look hard at Atlanta and Pittsburgh.

    Politics will play a definite role. I can see Bezos putting this headquarters in a blue city in a red state, but not in a red city in a red state (Sorry, Salt Lake City and Charleston. ). Programmers and managers want what we have here– a live-and-let-live cultural life and great night life with weekend access to beautiful mountains and beaches.

    It is sure not going to be in a place that is trying to legislate which bathroom transgender people can/cannot use or whether people can refuse to sell wedding cakes to gay people. Amazon’s search will get a lot of places to clean up their civil rights positions or they won’t even be in the running.

  13. 13
    N says:

    By Deerhawke @ 12:

    Amazon could also look hard at Atlanta and Pittsburgh.
    .

    Atlanta could definitely be a candidate. They actively recruit companies, have the nightlife, have a decent tech scene already and one of the better feeder schools in the nation in Georgia Tech with tech companies surrounding it, something like 16 fortune 500 companies to poach talent from including Coca Cola, Turner Broadcasting/AT&T, Home Depot, UPS. Also the biggest airport and a huge transportation and shipping hub. But then again if they do look at cities this large (much larger than Seattle), there will be lots of competition although not many places this large will beat on cost of living, amenities etc.

  14. 14
    Sid says:

    By Deerhawke @ 12:

    ……..
    Politics will play a definite role. I can see Bezos putting this headquarters in a blue city in a red state……….

    Yeah. Lot of discussion about this at my work today. A colleague of mine who is predicting it will be Austin has already starting looking for investments there. He was planning on buying something here however he is no longer moving forward with that.

  15. 15
    Dustin says:

    By Deerhawke @ 12:

    I really like Brian’s idea of Detroit, but there has to be an existing tech and financial infrastructure.

    The physical infrastructure – housing, utilities, etc – are in pretty bad shape too, from what I remember from a brief visit a couple years ago. People were saying even then that the city is on an upward trajectory, but even so the evidence of neglect (condemned/abandoned buildings) and lack of social services/support (police enforcement, etc) were evident everywhere. A new Amazon HQ and a Whole Foods could do a lot to generate wealth in the area and continue the city’s revival, but the level of rehabilitation Detroit needs will take time and require a lot of work. Amazon (and its white-collar employees) might prefer to settle somewhere that’s less of a fixer-upper.

  16. 16
  17. 17
    JB says:

    By Deerhawke @ 12:

    Amazon could also look hard at Atlanta and Pittsburgh.

    Pittsburgh has tech talent (especially in robotics), but isn’t big enough. I do think they will pick something in the eastern or central time zone. Atlanta and Boston seem like more likely choices.

  18. 18
    Pauly says:

    Taking the Amazon news to mean an impending bubble burst or any sort of significant change in Seattle RE market is a bit premature. Does it mean the times of 18% YOY price growth are over? Perhaps. Will we see a slowdown? Probably, but not because of this news. Does it mean we’re all of a sudden going to be growing below the national average? No way.

    1. They aren’t leaving. As 20-somethings continue to vest their stock grants to the tune of hundreds of thousands and reach a point in their lives when they want to settle down, they will buy houses.
    2. This announcement isn’t increasing housing supply.
    3. The presence of Amazon headquarters doesn’t explain the rapid price growth in other West Coast cities such as Portland.

  19. 19
    Deerhawke says:

    Amazon is hiring here like mad, but so are Microsoft, Google and Facebook. And let’s not forget the dozens of mid-size computer tech related companies and medical technology companies. And then there are the other tech and medical startups that are now reaching critical mass here. These companies move forward whether Amazon is here or not.

    Actually in the short to medium term, Amazon might need to hire more people here to do the planning to open another headquarters somewhere else. I would be surprised if anyone was actually moving into this new facility in less than 4 years. In the meantime, it is all Seattle.

  20. 20

    By GoHawks @ 7:

    It would be nice if supply would uptick a little and demand decrease a little and we settle into a more normal market. Sellers can still sell, but buyers can buyer, and trade up/downsizers/first timers have options.

    Exactly!

  21. 21
    Bubble Trouble says:

    Heh on the appraisals. I bought a house this spring. Transaction price was $218K.

    Guess what the appraisal came in at? $219K.

    Incredible how that works, huh.

    And all for the low, low cost of $700 to tell the bank that the house is worth exactly what someone is willing to pay for it. There are many scams in the world, but r/e appraisals have to be up there in the top 5%.

  22. 22
    Erik says:

    RE: Bubble Trouble @ 21
    Appraisals are a complete scam. I could go on and on, but I won’t. They can fluctuate over 100k in either direction.

  23. 23

    RE: Bubble Trouble @ 21 – The appraiser knows the contract price. The vast majority of appraisals come in at the list price because there’s no reason for the appraiser to go higher. Some do come in higher, but I would guess that the majority of ones that don’t come in at contract price come in below because in that situation there is a reason to go lower.

    As I’ve mentioned before though, the type of property most likely to not appraise is in a condo where most the units are fairly similar. There appraisers are less likely to adjust from prior sales–even relatively old prior sales.

  24. 24

    By Erik @ 22:

    RE: Bubble Trouble @ 21
    Appraisals are a complete scam. I could go on and on, but I won’t. They can fluctuate over 100k in either direction.

    That’s unlikely unless the property is rather unique (poor selection of comps) or it’s worth over $2M. Or you’re comparing a refinance appraisal to a sale appraisal.

  25. 25
    Bubble Trouble says:

    By Kary L. Krismer @ 23:

    RE: Bubble Trouble @ 21 – The appraiser knows the contract price.

    And that’s why the whole process is a scam.

  26. 26
    Bubble Trouble says:

    Amazon will pick a city where it will be able to call the shots. So it won’t be an Atlanta where there are several Fortune 100 companies HQs or Charlotte, where Bank of America is already a behemoth. Boston is insanely expensive and high taxes. Plus good luck finding room for a mega campus HQ in Boston. Not happening.

    Salt Lake City would be ideal, but as someone else mentioned, too many icky conservatives there for Bezos. Cheap r/e, lots of space, awesome outdoor activities for the granola set. But alas, they vote the wrong way.

    I predict Austin. Low taxes (no income tax in TX like in WA) and a very liberal population with UT as a great feeder college. Yeah Dell is there as well, but I think the two could live side by side nicely.

    Outside shot would go to Nashville (it has some icky yucky conservatives but generally a liberal city) and again no state income tax.

  27. 27
    N says:

    By Erik @ 22:

    RE: Bubble Trouble @ 21
    Appraisals are a complete scam. I could go on and on, but I won’t. They can fluctuate over 100k in either direction.

    It does seem like we are getting very close to the appraisal fraud of last decade, after that the feds monitored them like a hawk and it was really hard to get a property to appraise for what you needed, obviously that has shifted big time, I wonder what the oversight is like now.

  28. 28
    Bubble Trouble says:

    By N @ 27:

    By Erik @ 22:

    RE: Bubble Trouble @ 21
    Appraisals are a complete scam. I could go on and on, but I won’t. They can fluctuate over 100k in either direction.

    It does seem like we are getting very close to the appraisal fraud of last decade, after that the feds monitored them like a hawk and it was really hard to get a property to appraise for what you needed, obviously that has shifted big time, I wonder what the oversight is like now.

    Oversight? No comprende. LOL.
    There is no oversight. Anyone with a pulse gets a mortgage and every appraisal comes at or above selling price. That is the state of the r/e industry 10 years after the crash.

  29. 29
  30. 30
    Erik says:

    RE: Kary L. Krismer @ 24
    I’m not going to share details, but it just happened to me. Appraiser used 10 month old comps. 10 month old comps is $80k low in this market. Appraiser used old comps with no view and 300 sq ft smaller. It happens all the time Kary. I disputed and got it raised, but not nearly as high as it should have been.

    The exact same condo as mine with a worse view sold for over $100k higher than mine. Totally unfair!

  31. 31
    ess says:

    RE: Pauly @ 18

    Portland – has some tech, but the area chafes under a really strict growth management plan. One can really see it there – on one side of the street there are houses piled on top of each other with no lots, and across the street farmland. It is that stark in some outlying areas.

    And you are correct when you indicate that no one from Amazon is getting laid off. This isn’t like the Boeing bust of the early 70s when the company went from 100K to 40K employees in a state that had less than 3 million people. From what I can tell, there are no real change in plans for the amount of office space and thus workers Amazon will have in Seattle over the next few years. Probably the biggest change is that some will have a choice of working in HQ 1 or HQ2. Furthermore, as I said before – Amazon needs much more space even than the maximum that was planned for Seattle. And smart business move – shake down states for tax bennies in both HQ 1 and 2. Why only build in one area when you can play two states against each other? Hold on to your wallets as the legislature gives lots of tax goodies to Amazon over the next few years. It will make Boeing look like rank amateurs.

    So, we will all have to see what will happen. Perhaps it is a good thing that not one company totally dominates this area. Those of us old enough remember the Boeing dominance really understand that a one horse town is a tough place to get around in when the horse is ill or dead.

  32. 32
    jon says:

    The immediate impact will be that everyone that was buying or holding onto a house because of future price increases will want to not buy or to sell. That will drop prices in the near term. Amazon will continue to hire here for a couple more years, but then the growth will shift to HQ2. Amazon will probably not pay many of their employees to relocate, but some of those people will want to move on their own if the cost of living is lower, depending on how Amazon decides to handle compensation. That will drop prices in the long term. A lot also depends on what the job market looks like in the HQ2 city, because settling down in an area where there are not other similar employers is not a good plan for Amazon employees.

    This is good news for renters and for business owners that are being squeezed by costs in Seattle, but obviously bad for homeowners.

  33. 33
    Pauly says:

    RE: jon @ 32

    I’m not sure how you can see home values dropping any time soon but time will tell of course.

  34. 34
    S-Crow says:

    RE: Bubble Trouble @ 25 – What’s really funny is when an all cash buyer from 2016-17 is now refinancing and the appraisal comes in lower than “expected” therefore the appraiser is an idiot.

    S-Crow

  35. 35
    Hugh Dominic says:

    Hold on to your home equity, Seattle! Amazon moves fast and thinks long term. This is the first move in a long game.

    Seattle net hiring at Amazon will slow by 2019. Getting HQ2 off the ground will involve relocations from here to seed it and to bring its culture. Exactly how much it slows will depend on how sweet the deal from the competing city, and whether our socialist leaders get their sh!t together and learn how to run (not ruin) a city.

    Headline: “Amazon to reduce Seattle workforce by 10%; let leased office space expire.”

    Unthinkable? Think again. What year would you believe could be the first time you might read that?

  36. 36
    ess says:

    RE: jon @ 32

    Perhaps I am missing something. If Amazon had planned to build or rent 12 million feet of office space in the downtown area, and they build or rent the remaining 4 million that they are not already occupying over the next 3-5 years and hire the same number of people originally planned to fill that space, how does opening a second HQ affect that? I believe the office space Amazon planned for their Seattle campus when all was finished was to hold about 70K employees – I assume that is on track? It isn’t as if they are moving huge amounts of people out of the area, and I also assume it will take a number of years to get HQ2 up and running. I would assume that Amazon realized it was going to grow much bigger than anticipated by acquiring businesses such as Whole Foods – so why not develop two separate HQers and lobby two states for tax relief? Makes sense to me. It is the Boeing model of corporate pressure all over again.

    I would guess that some of these mega apartment projects that are on the drawing boards will be delayed or canceled – reducing the number of new apartments in the Seattle area in the coming years. I would also guess that if there are individuals who are going to not buy but stay in the area because of this announcement , they will rent and those actions will continue to keep the rental market tight and expensive. Everyone really loses when a major employer either shifts their operations elsewhere, or lays off individuals, and apparently Amazon is not doing either in Seattle. So long as there is no loss of population and jobs in the Puget Sound area, the housing market should not be impacted in a big way. If I am wrong in those assumptions – please alert me!

    Besides – they have to stay – they have that really cool biosphere bubble.

    Perhaps Tim can establish a poll of the likely candidates for HQ2 and everyone can vote on it, and then we can see what percentage of the folks were correct when Amazon announces its decision.

  37. 37
    Spokant says:

    RE: ess @ 36

    I think most of that is right, but the news of an “HQ2” literally dropped this morning, so people are scrambling to make sense of this.

    As I mentioned above, I think part of this is zero sum; if the Seattle “boom” was banking on the fact that there would be one and only one HQ, then the decision to establish an “equal” HQ2 tells me that the speculative market is not as good as it was prior to the announcement. I don’t think most of us really know what the implications are of that, but I think we can agree the ramifications could run deep.

    And all of that is being said by someone like myself who really thinks a damper on the market here is nothing but a good thing. 18 percent? That’s ridiculous.

  38. 38
    redmondjp says:

    Re: Amazon new HQ location. Detroit – no fracking way! But the greater Denver area? I definitely can see that (and legal weed too). It all depends upon what kind of tax abatement package they can get.

  39. 39
    Shay says:

    I am a prospective home buyer in the Bellevue/Redmond area. Are prospective buyers holding off on home purchases following this news from amazon ?
    Does it make sense to buy now ? Or wait and rent it out for a few years ?

  40. 40
    Eastsider says:

    On a separate (non-Amzn) topic, does anyone really believe we have a (low) inventory problem? Check out the Monthly SFH closed/pending sales charts above. LOL.

  41. 41

    By Erik @ 30:

    RE: Kary L. Krismer @ 24
    I’m not going to share details, but it just happened to me. Appraiser used 10 month old comps. 10 month old comps is $80k low in this market. Appraiser used old comps with no view and 300 sq ft smaller. It happens all the time Kary. I disputed and got it raised, but not nearly as high as it should have been.

    The exact same condo as mine with a worse view sold for over $100k higher than mine. Totally unfair!

    I think that’s what I said–condos are a problem and the appraisers will be sometimes unwilling to alter from prior sales–even old prior sales. I had a condo transaction recently where the comp was also about 10 months old.

    I’m surprised though that they would use a comp that is so significantly different in size, even if in the same complex. That’s not right–you can’t adjust that much (unless maybe one was 2,000 and the other 2,300).

    You’re unlikely to see that in houses unless maybe you’re dealing with a development where all the houses were built the same floor plan and trim level.

  42. 42

    By Eastsider @ 39:

    On a separate (non-Amzn) topic, does anyone really believe we have a (low) inventory problem? Check out the Monthly SFH closed/pending sales charts above. LOL.

    I think you’re confusing inventory and volume. The volume levels have been fine, but inventory is very low (as is the absorption rate). There’s actually a chart for inventory above–look at it instead of closed/pending sales.

    I forget who it was, but a few months ago someone was wondering how agents were surviving in this market. It’s a difficult market for buyer’s agents, but the issue is not volume–there are plenty of transactions. The problem for buyer’s agents is getting their clients’ offers accepted, and that varies by agent.

  43. 43

    This post responding to greg in the prior thread got held up in moderation. I’m changing a two letter abbreviation so that won’t occur again.

    By Kary L. Krismer @ 158:

    responding to greg post 152 in prior thread:

    Rather than say over/under valuation isn’t something “I deal in,” I should have just said I consider it all Chocolate sause. I’m familiar with the concept. A stockbroker will say a stock of over/under valued depending on whether they want you to sell or buy. It makes about as much sense as “profit taking.”

    I believe in the concepts of economics and the market. Something might be higher or lower price than you think it should be–that’s a matter of opinion. There’s no way to quantify that as over or under valued by a certain amount unless you want to aim for some arbitrary number, like a PE of a certain level, etc. And you can claim something is over or under valued all you want, but that doesn’t mean the market will head that way no matter what multiple or fraction of a stat you use as a guide–the buyers and sellers will determine that.

    Returning to the topic of houses, when someone wants to buy or sell a house I don’t try to determine whether the market is too high or too low. I try to determine what the market is. That is real, the other is just fantasy.

  44. 44
  45. 45
    Hugh Dominic says:

    RE: ess @ 36 – Amazon leases a lot of space downtown, in addition to its owned space. They could easily let those leases expire and consolidate down to a smaller footprint.

  46. 46
    Bubble Trouble says:

    I love the spin here. Amazon just announced that 1/2 of its future employees will be somewhere else and somehow this will have no impact on r/e in Seattle.

    LOL.

    And no I don’t mean Seattle’s AMZN workforce will be cut in 1/2. But 1/2 the growth of future employment will be somewhere else. And all those $2M condos built on the idea that there will be a never ending supply of 28 year olds making $350K a year at Amazon, just lost 1/2 their potential buyers.

  47. 47
    Jon says:

    It’s not just slowing Amazon growth by 50 percent. It is opening up a new HQ in a lower cost location, which could cause them to draw down on old HQ1.

    Just the uncertainty may cause potential new hires to stay away from Seattle, because home ownership suddenly got very risky here. Eventually we will get past this and be less if a one company town and that’s good.

  48. 48
    Bubble Trouble says:

    By Jon @ 47:

    It’s not just slowing Amazon growth by 50 percent. It is opening up a new HQ in a lower cost location, which could cause them to draw down on old HQ1.

    Just the uncertainty may cause potential new hires to stay away from Seattle, because home ownership suddenly got very risky here. Eventually we will get past this and be less if a one company town and that’s good.

    Good point. Although this won’t be immediate. Wherever HQ2 will be, it will be a year at minimum before anyone is employed there. But during that year, you’re right, AMZN employees will think long and hard about buying something in Seattle if there’s a chance in 2 years they could be shipped off to HQ2,.

    And just like that the “Seattle is special and the rules don’t apply here” theory gets blown up. I thin NYC is the one true “special” city, where the rules don’t apply. But everywhere else…Seattle, SF, LA, Denver, Miami….you ain’t that special baby.

    And really, on the east coast, Seattle is still perceived as an also-ran. Well there is the inherent east coast bias. But even accounting for that, Seattle is a bit of an afterthought in the minds of non west coasters, when it comes to importance and influence.

  49. 49
    wreckingbull says:

    This is a good time to remind everyone that any market is made at the margin. Proceed accordingly. If I were a condo empire magnate, I would start unloading in an orderly fashion. (assuming I did not have to bring my checkbook to the escrow office).

  50. 50
    Bubble Trouble says:

    2 years from now…

    You are a 26 year old hotshot software engineer.

    You have been hired by Amazon and you have two choices:

    1. Move to Seattle where the sun doesn’t come out for 6 months and rent is $2500 for a 1 bedroom.

    2. Move to Austin where the same apartment goes for $1200 and you can wear shorts in February.

    Hmmm…..

  51. 51
  52. 52
    Bubble Trouble says:

    By wreckingbull @ 51:

    RE: Bubble Trouble @ 50 – To be fair, those Seattle rents may come down a bit:

    https://static.seattletimes.com/wp-content/uploads/2016/12/WEB-apartment-boom.jpg

    True. My point is that the Seattle population boom has been out of necessity. AMZN is here so if you want to work for them, you kinda have to be here as well. But nobody dreams of someday living in Seattle because of Seattle itself. But if you can still work for Amazon and be in Austin or Denver or whatever the not-Seattle option is, people will choose that option more often than not. IMO.

    But wow that is some chart.

  53. 53
    wreckingbull says:

    RE: Bubble Trouble @ 52 – I would agree. It used to be that Seattle would be highly desirable compared to Denver or Austin, Amazon or no Amazon. That gap is closing rather quickly, due to the city’s rampant property crime, drug use, homelessness, crushing traffic, housing prices, and bizarre politics.

  54. 54
  55. 55
    Pauly says:

    There is a huge difference between a slowdown, which would be healthy and was bound to happen with or without this Amazon news, and correction, bubble-burst, etc. My opinion is that this news will have an effect on the former, but the latter remains highly unlikely in the next 3-5 years.

  56. 56
    wreckingbull says:

    RE: QA Observer @ 54 – Everyone’s city is special. One of my favorite special posts dates back to the prior bubble. Done by a guy named Greg Swann out of Phoenix. Look at the post, but more importantly, look at the date of the post.

    http://www.bloodhoundrealty.com/BloodhoundBlog/114/21-reasons-to-bank-on-the-phoenix-real-estate-market/

    I do give the guy credit for not pulling the blog post, as most other REIC bulls did.

  57. 57
    justme says:

    http://www.seattletimes.com/business/real-estate/could-amazons-hq-bombshell-let-the-air-out-of-seattles-housing-and-development-boom/

    You gotta love this article , and you gotta love the comment section. Looks like all the same people that frequent Seattle bubble every day, but with different usernames. And how the tune suddenly changed in one day.

    Before HQ2: Seattle is prime, because AMAZON!!!
    After HQ2: Seattle is prime, because so much more than just AMAZON!!!

    Full sarc mode: Uh, because HQ2 is not yet! Uh, because Amazon has “committed” to more development here! Uh, because, DERP!

  58. 58
    Bubble Trouble says:

    By wreckingbull @ 53:

    RE: Bubble Trouble @ 52 – I would agree. It used to be that Seattle would be highly desirable compared to Denver or Austin, Amazon or no Amazon. That gap is closing rather quickly, due to the city’s rampant property crime, drug use, homelessness, crushing traffic, housing prices, and bizarre politics.

    Was it? I’m from the east so, like I said above, to me me Seattle was always an afterthought in terms of cities I’d like to live in. Austin was always cool. Denver, if you like to ski was the place to be. Miami was cool. Dallas was cool-ish as was Atlanta. Seattle….it was this rainy city really far away from everything. I guess though, for people from the west and mountain west, it would be a different perception.

  59. 59
    Bubble Trouble says:

    By wreckingbull @ 56:

    RE: QA Observer @ 54 – Everyone’s city is special. One of my favorite special posts dates back to the prior bubble. Done by a guy named Greg Swann out of Phoenix. Look at the post, but more importantly, look at the date of the post.

    http://www.bloodhoundrealty.com/BloodhoundBlog/114/21-reasons-to-bank-on-the-phoenix-real-estate-market/

    I do give the guy credit for not pulling the blog post, as most other REIC bulls did.

    LOL. You should have heard the nonsense peddled by used house salesmen in Las Vegas circa 2005. I know, I was there. It was going to be the next New York City since everyone in the world wanted to move there because X Y and Z. And the sad thing is they actually believed what they said.

    It’s incredible how everything that happened in the mid 2000s is happening now and yet everyone swears up and down that THIS TIME IT’S DIFFERENT!!!

    There’s a saying that economic cycles last 10 years, but people’s memories are only 8 years. For Bubble 2.0 this couldn’t be more true.

  60. 60
    justme says:

    I mean, if even Jeff licking Bezos, the king of unsustainable business practices, has decided he cannot hire people in Seattle, and decided to go elsewhere, what does that say about the sanity of all the bubble-mongers here in Seattle?

    Amazon Prime: Free shipping from Seattle/HQ1 to HQ2.

  61. 61
    wreckingbull says:

    RE: Bubble Trouble @ 58 – Well, it is a personal opinion. I lived in Denver for a few years, and I still visit Austin yearly to see an old college friend. In my opinion, neither place is as desirable. As I mentioned before, this is absolutely changing now.

    I do have a laugh a little bit at your backwater talk. Most likely you flew here in a modern turbine-powered aircraft, have used a PC, live in a home with engineered wood products, and bought bulk products at a steep discount. The Seattle area could not have possibly had anything to do with these things, could it?

  62. 62
    Bubble Trouble says:

    By wreckingbull @ 61:

    RE: Bubble Trouble @ 58 – Well, it is a personal opinion. I lived in Denver for a few years, and I still visit Austin yearly to see an old college friend. In my opinion, neither place is as desirable. As I mentioned before, this is absolutely changing now.

    I do have a laugh a little bit at your backwater talk. Most likely you flew here in a modern turbine-powered aircraft, have used a PC, live in a home with engineered wood products, and bought bulk products at a steep discount. The Seattle area could not have possibly had anything to do with these things, could it?

    Heh. I didn’t mean to bash Seattle. Obviously Boeing and MSFT have been incredibly influential on the world. Just saying it’s how I viewed the world 20ish years ago when I was a young college grad looking to strike out in the world. Seattle wasn’t even on my radar.

  63. 63
    N says:

    Pretty neat article, especially the chart that shows square feet numbers by company. They forgot to mention Starbucks which by a quick search would be second to Amazon with 2 million square feet (no one else even approaches 0.5mil sq ft). Or maybe SODO doesn’t count.

    If you did have a 10-20% drop in buyers that would certainly affect the market (say a combination of less Amazon buyers + less investors).

    http://www.seattletimes.com/business/real-estate/could-amazons-hq-bombshell-let-the-air-out-of-seattles-housing-and-development-boom/

    He said he’s concerned about a potential luxury-apartment bubble; those units require a constant influx of well-paid newcomers to fill them.

    “It’s just different degrees of hotness,” Shull said. Even if demand drops off, the city still has an inventory shortage that is also driving up prices. “We just don’t have enough houses.”

    Eric Shull, a Seattle managing broker with John L. Scott Real Estate, estimated about 10 to 20 percent of Seattle homebuyers are Amazon employees.

  64. 64
    Bubble Trouble says:

    By N @ 63:

    Eric Shull, a Seattle managing broker with John L. Scott Real Estate, estimated about 10 to 20 percent of Seattle homebuyers are Amazon employees.

    So 40K people (number of AMZN employees in the Seattle area) are buying 10-20% of the houses in a city with a population of 3.5M (MSA population)? That doesn’t seem possible.

    If it is true, this bubble burst is going to make 2009 look like a blip.

  65. 65

    RE: N @ 63 – That SBUX building has a ton of square footage in it. It’s deceptively big.

  66. 66
    Brian says:

    By Bubble Trouble @ 64:

    So 40K people (number of AMZN employees in the Seattle area) are buying 10-20% of the houses in a city with a population of 3.5M (MSA population)? That doesn’t seem possible.

    If one of the few groups of people that can afford houses at these prices are highly paid AMZN employees, then it’s definitely possible.

  67. 67
    N says:

    By Bubble Trouble @ 64:

    By N @ 63:

    Eric Shull, a Seattle managing broker with John L. Scott Real Estate, estimated about 10 to 20 percent of Seattle homebuyers are Amazon employees.

    So 40K people (number of AMZN employees in the Seattle area) are buying 10-20% of the houses in a city with a population of 3.5M (MSA population)? That doesn’t seem possible.

    If it is true, this bubble burst is going to make 2009 look like a blip.

    I took that to mean 10-20% of the houses bought in a given month so if we are selling 2700 a month or so then 270 houses are bought by Amazon employees.

  68. 68
    Bubble Trouble says:

    By N @ 67:

    By Bubble Trouble @ 64:

    By N @ 63:

    Eric Shull, a Seattle managing broker with John L. Scott Real Estate, estimated about 10 to 20 percent of Seattle homebuyers are Amazon employees.

    So 40K people (number of AMZN employees in the Seattle area) are buying 10-20% of the houses in a city with a population of 3.5M (MSA population)? That doesn’t seem possible.

    If it is true, this bubble burst is going to make 2009 look like a blip.

    I took that to mean 10-20% of the houses bought in a given month so if we are selling 2700 a month or so then 270 houses are bought by Amazon employees.

    Yeah that makes sense. Still a bit over 1% of the population accounting for 10-20% of r/e sales? That’s amazing. And still people are saying HQ2 won’t hurt sales. LOL

  69. 69
    Mr. Escape Artist says:

    Shoot, this has me nervous. We are thinking of leaving in a couple of years…should we sell now and rent?

  70. 70
    N says:

    By Kary L. Krismer @ 65:

    RE: N @ 63 – That SBUX building has a ton of square footage in it. It’s deceptively big.

    Yes, I spend quite a bit of time there and Starbucks has slowly taken it all over!

    The history of the big Sears buildings around the country are very interesting and if you ever are in the 3rd floor cafeteria in the buiding that is open to the public you can see a few pics from back in the day. In Atlanta (also a gigantic brick midrise) the old Sears building sat for years and was recently turned into a multi use, food hall (their pike place if you will) etc and it too is 2million plus square feet. There was a thesis paper written about the Sears operation there and the customer letters they would receive back when the way you got things in rural america was ordering from the Sears catalog, some pretty cool and funny stuff.

  71. 71
    Doug says:

    The bears are out in full force on this HQ2 headline! I get it, this is fodder for anyone who’s been starving for just a crumb of negative news to support a bear narrative when everything else has been so bullish for so long.

    While I think it’s pretty shortsighted to base your market opinion on 1 company’s decision, I am, and completely void of this news by the way, starting to wonder who the marginal buyer is at these prices. I’m personally at my maximum willingness to pay and if I were a new home buyer today I’d be looking outside the city. But I also probably have a very different opinion of what percentage your house should be of your net worth than most people (mustachian influence).

    That’s not to say there are not still reasons to be bullish. The biggest two being zero supply and near all-time low mortgage rates. A $1mm house with an $800k mortgage, excluding insurance and taxes, can be had for $3,700 per month. And everyone here already knows I think that’s going lower. All-time mortgage lows are yet to be seen. Hint: the yield curve is its flattest since the beginning of the recession at 1.01% and flattening still ahead of the next recession. And Seattle is still ridiculously cheaper than the other major metro areas.

    A friend recently visited from San Francisco and couldn’t believe the house we got at the price we got it for and lamented the fact that the same house in SF would be anywhere from 2-5x. And we make the same amount of money.

    That kind of price discrepancy can continue to drive hoards of well paid young professionals to Seattle. And they get an instant 12% raise assuming a move from California.

  72. 72
    Bubble Trouble says:

    By Doug @ 70:

    That’s not to say there are not still reasons to be bullish. The biggest two being zero supply and near all-time low mortgage rates. A $1mm house with an $800k mortgage, excluding insurance and taxes, can be had for $3,700 per month. And everyone here already knows I think that’s going lower.

    Oh *just* $3700 (which is $4500 including tax/insurance). What a bargain! The fact median HH income in King County is $77K and you’d need at least $250K to semi-comfortably afford $4500/mo on housing……who cares? It’s Seattle. It’s special. Cuz….STUFF!!

    And that $3700 is of course assuming you have $200K for a downpayment. Which as we all know is chump change these days, everyone has at least $500K in the bank since Americans love to save money.

  73. 73
    Brian says:

    RE: Doug @ 70

    You really think mortgage rates will go lower? Just this morning the head of the NY Fed was on my TV on CNBC saying the Fed is going to start unwinding their trillions of treasuries “very soon.” I’m not an expert on the treasuries market, but if the Fed started selling and/or stopped buying bonds, I would think that would cause bond prices to fall, which means yield prices rise. Thus mortgage rates rise. Right?

  74. 74

    RE: N @ 69

    Reminds me of eating at the Horn and Hardart’s “Automat”. :) I think they were only in Philly (where I am from) and NY. https://www.youtube.com/watch?v=nTqjO-dHTmE

    When I started in Real Estate I started at Coldwell Banker, that was owned by Sears and connected to “Sears Mortgage”.

    Seems like just yesterday…but now the stuff of museums. :)

  75. 75
    Doug says:

    RE: Brian @ 72 – Yes, that is all mechanically correct. What is incorrect is how much they will be able to sell if any at all (they have already stopped buying) before the next recession. I believe any rise in rates will be short term and met with new all-time lows. I think we’ve already seen the short term rise when the 10y recently peaked at 2.65%.

    Also, talking up the yield curve is the Fed’s favorite tool these days so I wouldn’t listen to anything on TV. Instead just watch the 10y yield. It won’t lie.

  76. 76
    Doug says:

    RE: Bubble Trouble @ 71 – Listen I already said I’m starting to wonder who the marginal buyer is and not suggesting that a $200k down payment is chump change.

    But I also recognize that there are households out there that can support it. A DINK household can still live very comfortably using those numbers. Not saying it’s the smartest use of their money, just that it’s doable. Personal finance is a foreign language to the average person.

    Also, if you’re going to use median income numbers let’s use median home value numbers.

  77. 77

    By Brian @ 66:

    By Bubble Trouble @ 64:

    So 40K people (number of AMZN employees in the Seattle area) are buying 10-20% of the houses in a city with a population of 3.5M (MSA population)? That doesn’t seem possible.

    If one of the few groups of people that can afford houses at these prices are highly paid AMZN employees, then it’s definitely possible.

    I think what you need to look at are the number of new corporate (office) employees, not total employees. And those people would be more likely to buy, but some obviously will rent.

  78. 78
    wreckingbull says:

    RE: N @ 69 – One of my earliest memories was picking out Winnie the Pooh pajamas in the Sears catalog, then going down to the SODO store to pick them, because my parents were too cheap to pay for shipping.

    They were those one piece PJs with the built-in shoes that had the “unmarked train crossing”. Had a bit of a traumatic experience that night, and this is probably why I remember the day so well, not because of the expansive retail wonderland that was the SODO Sears. Sorry, “TMI” as the kids say these days.

  79. 79
    whatsmyname says:

    So 50,000 jobs we weren’t expecting won’t be coming here.
    What’s more, every city in North America, excepting one, will suffer the same fate.
    Mother of all recessions, or most widespread game un-changer in years?

  80. 80
    OA says:

    RE: Doug @ 70

    “I’m personally at my maximum willingness to pay and if I were a new home buyer today I’d be looking outside the city. But I also probably have a very different opinion of what percentage your house should be of your net worth than most people (mustachian influence). ”

    Out of curiosity – what’s your opinion of what % that should be?

  81. 81
    Doug says:

    RE: OA @ 79 – my long term goal is 10%, but I’m no where close to that number today and I know that’s pretty aggressive. Aim to replicate the asset allocation of the top 1% shown in these charts (I’ve seen similar versions of this on ZH as well): https://blogs.wsj.com/economics/2014/12/26/how-to-save-like-the-rich-and-the-upper-middle-class-hint-its-not-with-your-house/

    I’m not suggesting that anyone purchase their first or second house at a price that puts your primary residence at 10% of NW, just that it’s reasonable enough to allow you to shift dollars away from it over time. I think people often become so house poor that they basically prevent themselves from ever being able to grow any other assets.

    FinancialSamurai also has some more reasonable target allocations by age here: https://www.financialsamurai.com/recommended-net-worth-allocation-mix-by-age-and-work-experience/

  82. 82
    ARDELL DellaLoggia says:

    RE: whatsmyname @ 78

    When it arrives, it won’t be that easy to find the cause. That it was time in the cycle for it to happen won’t suffice. People prefer to find someone to blame.

  83. 83
    whatsmyname says:

    RE: ARDELL DellaLoggia @ 81 – I agree with your statement, but mine probably wasn’t clear. I was saying that not getting something that you didn’t expect is pretty much getting what you did expect. It is not a reason for disillusionment or panic – regardless of the size of the numbers. This change is not that significant for Seattle for at least the next 5 – 8 years.

  84. 84

    I’ve been as critical of Seattle city government as anyone, but one argument I’m not buying is that this Amazon move is the result of Seattle government’s anti-business tendencies. That’s rather absurd given the fact that there are other local nearby cities that Amazon could expand to if they wanted to. Bellevue and Redmond come to mind, but there are others if they wanted to get creative.

    The anti-business positions probably keep other smaller companies from starting in Seattle, and may cause other smaller companies to move out of Seattle, but I just don’t see it having a huge impact on Amazon. The $15 minimum wage would barely impact them. Not much of the landlord stuff would hurt them. Maybe the allowing the construction of buildings with insufficient parking????

  85. 85

    By whatsmyname @ 78:

    So 50,000 jobs we weren’t expecting won’t be coming here.
    What’s more, every city in North America, excepting one, will suffer the same fate.
    Mother of all recessions, or most widespread game un-changer in years?

    Someone has apparently been immunized against being affected by hype! ;-)

  86. 86
    jon says:

    While renters don’t have equity at risk, with the uncertainty about future house prices, people will avoid buying houses at current prices. For a couple of years the demand and price for rental units will go up, until Amazon starts filling in HQ2 buildings. But after that then assuming the new city has significantly lower rental rates, there will be an outflow to the new city until the prices are closer to parity. House prices will adjust accordingly in anticipation of that.

  87. 87
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 84

    Maybe you just don’t put all your eggs in one basket? Are people really complaining that they don’t get it all? How greedy can people get? Do we really need it all?

  88. 88
    justme says:

    RE: Brian @ 73

    The FRB has so far (since QE “ended”) been reinvesting payments of principal (typically at maturation) and interest (typically periodically) on existing bonds into new bonds. Hence the effect of QE has been maintained. When FRB stop reinvesting, bond prices will drop and interest rates will rise correspondingly.

    At the same time, bank reserves held at/by the FRB will taper by the same amount as the matured-but-not-reinvested bonds. Why? Well, because when FRB “buys” bonds, they “pay” for it by crediting the reserve account of the (primary dealer) bank that is “selling” the bonds to the FRB. Basically what the FRB is doing is to accept (crappy) bonds as collateral for (new) reserves. Reserves are the currency for interbank debt payments, and hence equivalent to cash banknotes. Reserves are essentially the same thing as cash banknotes. When the bonds mature (or pay a periodic/monthly principal + interest) , the FRB gets paid from the reserves, which then dwindle unless a reinvestment of the same amount is made.

    Going further out on that same tangent, I would say that 99.9% of the population does not know or understand the above. They have been told that the FRB “prints money” and create it “out of thin air” by “keystrokes” or some bullchocolate like that. No, that is not what FRB does. But the truth is every bit as scary. They create new money by accepting crappy collateral (read: mortgage backed securities) as the backing for the new money. The reserves can then be amplified by the fractional reserve multiplier and turned into massive lending, leading to rampant asset inflation, as we have seen since 2009.

  89. 89
    RookieHomeowner says:

    Forgive me as I am just a Seattle homeowner. We feel stuck in our small home and we were hoping to sell in 2018 after being in our “starter home” for 6 years. Now we feel stuck. Sure we can sell high, but we are scared of not being able to get back into a bigger home in our specific area. Any advice? What would you do in same situation?

  90. 90
    OA says:

    RE: Doug @ 81

    Great links, thank you. I love reading this sort of stuff.

    I guess alot of that depends on how much equity to loan you actually have on the primary residence and the price appreciation of houses in that area. If one puts a decent-sized down payment on a house that has a higher appreciation rate (due to it being in high demand location), then that ratio will definitely be higher (which is a good thing of course).

  91. 91
    Seattle home builder says:

    I’m 61 years old. Ive built and sold homes, condos, town homes and commercial properties inside the city of seattle since 1985. Rececions, Boeing, Microsoft, interest rates, wars, stock market, I think just about everything. If selling, Clean your house, fix everything, stage well and don’t get cocky. If buying look for location, price and don’t fall in love with the property until you firm up your purchase and sale agreement. Seattle real estate isn’t going anywhere it hasn’t been before.

  92. 92

    By ARDELL DellaLoggia @ 87:

    RE: Kary L. Krismer @ 84

    Maybe you just don’t put all your eggs in one basket? Are people really complaining that they don’t get it all? How greedy can people get? Do we really need it all?

    Assuming you’re talking about Amazon’s jobs, do we even want it all? I’ve read a lot of complaints about what has happened down in the Silicon Valley area due to the number of tech jobs. And those types of complaints have started up here. Moderating the growth is probably a good thing. The concern of some people though would be net jobs leaving.

  93. 93
    whatsmyname says:

    RE: Kary L. Krismer @ 85
    Still waiting for the Great ARM Reset of 2007 :)

  94. 94
    Erik says:

    RE: ARDELL DellaLoggia @ 87
    Yes we want it all. Mo’ money, mo’ better.

  95. 95
    Anonymous Coward says:

    RE: RookieHomeowner @ 89 – You sound pretty similar to where we were in 2014. I spent a lot of time thinking about how to solve that exact problem and here’s what we did: we bought the new house and then sold the old house. But how do you come up with the 20% down payment when so much of your downpayment is coming from the equity in the first house? This is about the only time a 401(k) loan ever makes sense*. You take out a 401(k) loan to help with the down payment on the new house and pay the load off once the first house closes. The alternative is to use something called a bridge loan which is basically a mortgage across two properties where the LTV is calculated against both properties. Then you refinance into a traditional mortgage at the same time you sell the first property. The disadvantage of the 401(k) option is you need to be very, very realistic about your net proceeds from the first house. And you have to be able to show income and assets to qualify for both properties at the same time. The advantage is that your offer is a lot cleaner because the seller doesn’t have to worry about your existing property not appraising. The disadvantage to the bridge loan option is it’s a lot more paperwork and your offer isn’t as clean because there’s some risk that your existing property won’t appraise. The advantage is that it would give you the option of keeping your existing property and renting it out.

    Note that buying and then selling also gives you the opportunity to offer a short team lease-back to your seller which can be very attractive. Particularly to a family with children (who are most likely going to be the inhabitants of the type of property you want to buy)…

  96. 96
    uma says:

    RE: Seattle home builder @ 91 – What would you recommend for a prospective buyer ?

  97. 97
    RookieHomeowner says:

    Thanks for your in-depth response. We had thought about the 401k option but have not looked into the Bridge loan option. Obviously in this market we want to be attractive buyers as well. We also have two small children and want to stay in our same neighborhood, so we are slightly picky about our next home. Really appreciate your advice, and I will certainly be saving your response for reference. RE: Anonymous Coward @ 95

  98. 98

    RE: Anonymous Coward @ 95RE: RookieHomeowner @ 97 – As much as I hate the idea of using retirement funds as a general principle, I do think that it would be more attractive to a seller holding multiple offers than a bridge loan. And if the buyer doesn’t mis-judge the equity in their current house they would basically be encumbering one exempt asset temporarily instead of encumbering another exempt asset (the current home). Finally, the funds from the exempt retirement account would be going into a new exempt asset–the new house, so the total value of exempt assets would not change much (mainly costs of sale). But there may be other downsides to borrowing those funds which I’m not thinking of. Many companies may have materials on the pros and cons of using retirement funds, or a buyer could seek out other sources of such information.

    The seller would most likely expect a buyer to provide somehow document on the buyer’s right to borrow the funds though, sort of like how they expect to see an approval letter on a conventional loan. And for that loan of retirement a buyer would want to consider the use of Form 22EF, rather than 22A, which is merely a disclosure that you’re using such funds, and not technically a contingency, meaning if the buyer cannot access those funds they would lose their earnest money. That should make it more attractive to the seller, but at greater risk to the buyer.

    On the bridge loan side a buyer would need to consider the cost of getting such a loan, and what the effect would be of a default. People should always consider the worst case scenario (loss of income two months after buying, severe downturn in the real estate market or change in the lending market, etc.).

  99. 99
    Seattle home builder says:

    RE: uma @ 96 – Dear Uma, buy in a seattle district that has demand. take care of your investment. Think outside the box about your investment i.e. Rental , air B&B in which case don’t fall in love with your investment. Seek positive experienced advisors.

  100. 100
    justme says:

    Lots of new users (or dormant old users) coming out of the woodwork and posting comments and questions after the Amazon HQ2 announcement. The nervousness is palpable, and for good reasons.

  101. 101
  102. 102
    Seattle home builder says:

    RE: justme @ 100 – my first ever post on a blog.! Inspiration to do so drivin by concerns for young people starting out. 1980 was my first ever house after college. Phinny ridge 55k. 14,500.00 annual salary. Cried outside before closing thinking my life is over and I paid too much.

  103. 103
    Bubble Trouble says:

    By Doug @ 76:

    RE: Bubble Trouble @ 71 – Listen I already said I’m starting to wonder who the marginal buyer is and not suggesting that a $200k down payment is chump change.

    But I also recognize that there are households out there that can support it. A DINK household can still live very comfortably using those numbers. Not saying it’s the smartest use of their money, just that it’s doable. Personal finance is a foreign language to the average person.

    Also, if you’re going to use median income numbers let’s use median home value numbers.

    Median HH income in King County: $75K
    Median home price in King County: $586K

    This is not sustainable. Period.

    And yes there is always someone out there who can afford $1M or a $10M home for that matter. There will always be rich people. But when the typical home costs $1M, there aren’t enough typical people earning enough to buy that house. As a point of reference the top 1% in WA state is $387K. Top 5% is $317K (this is household income). So while there are the DINKs you’re talking about, they are few and far between.

    I’m in that evil top single digit percent. And there is no way in hell I’d be comfortable with a $4500/mo housing cost. Could I afford it? I suppose. Would I be sleeping at night? Probably not. I like knowing that I contribute more to my retirement account every month than I pay in housing costs. That’s something that might be a teenie bit tougher to do at $4500/mo (plus repairs and maintenance which wasn’t part of the initial discussion).

    Again I know it’s doable, but just because something is doable, doesn’t always mean it should be done.

  104. 104

    RE: Bubble Trouble @ 103 – I should just create a Word doc that I can copy and paste from whenever someone compares median income and median price.

    First, not everyone is in the market for buying a house. There are people who make too little money. People who don’t intend to stay in Seattle very long. And also just people who don’t want to buy (including those who already own a house). If you want to look at median income you would need to compare the median income of potential home buyers to the median price.

    Second, even that wouldn’t tell you much because not everyone uses income to buy a house. Wealth is also used, either cash or a large down payment.

    So other than the fact that it’s completely meaningless, the following is a great observation! /sarc

    Median HH income in King County: $75K
    Median home price in King County: $586K

    This is not sustainable. Period.

  105. 105

    By Bubble Trouble @ 103:

    I’m in that evil top single digit percent. And there is no way in hell I’d be comfortable with a $4500/mo housing cost. Could I afford it? I suppose. Would I be sleeping at night? Probably not. I like knowing that I contribute more to my retirement account every month than I pay in housing costs. That’s something that might be a teenie bit tougher to do at $4500/mo (plus repairs and maintenance which wasn’t part of the initial discussion).

    This does have some validity, but it comes down to personal preferences. Personally I’d rather put more money down and have a lower payment, decreasing the overall cost of the house if necessary to keep the payment to a reasonable amount. But others make different decisions than I do.

  106. 106
    Doug says:

    RE: Bubble Trouble @ 103 – I wonder if The Tim can post the most recent affordability chart?

  107. 107
    Bubble Trouble says:

    By Kary L. Krismer @ 104:

    RE: Bubble Trouble @ 103 – I should just create a Word doc that I can copy and paste from whenever someone compares median income and median price.

    First, not everyone is in the market for buying a house. There are people who make too little money. People who don’t intend to stay in Seattle very long. And also just people who don’t want to buy (including those who already own a house). If you want to look at median income you would need to compare the median income of potential home buyers to the median price.

    Second, even that wouldn’t tell you much because not everyone uses income to buy a house. Wealth is also used, either cash or a large down payment.

    So other than the fact that it’s completely meaningless, the following is a great observation! /sarc

    Median HH income in King County: $75K
    Median home price in King County: $586K

    This is not sustainable. Period.

    LOL. Yes, I’e heard this rebuttal from used house sellers as well many times. What you fail to mention is that historically the median income to median house price has been 3-4X. When it gets out of wack, prices correct. This isn’t an opinion it’s about 100 years of empirical data. But I know, Seattle is different and stuff.

    There will always be the ex exceptions like people buying a house with an inheritance or what have you. If you’re using that as the reason why prices aren’t too high…..you should rethink your argument.

  108. 108
    Doug says:

    RE: Bubble Trouble @ 107 – 3-4x is the national historical average. Major metros, which Seattle is now a part of, have been much higher and tend to be more volatile. I think San Jose is around 10x right now.

    So is 7.8x in Seattle too much? Probably not at these interest rate levels. If rates go up I’m sure prices will come down. I just doubt rates are going anywhere but down. Also, does it make intuitive sense to you for the median house in Seattle to be priced at 3-4x income equating to $225k-$300k?

    Too much bubble propaganda is being spewed in a vacuum without taking broader macro truths into consideration.

  109. 109

    RE: Bubble Trouble @ 107 – Rather obviously the higher a ratio is the more likely the price will come down, but that doesn’t mean that the price will come down or that the lack of income would be the reason. You could say the same thing about higher prices in general. Correlation is not causation, but this goes well beyond that. You’re measuring the median income of the wrong people! It’s completely meaningless.

    The median in San Francisco has been between 2-3 times our median for many years now. Their income is higher, but not 2-3 times higher. Per this link it’s about $77,000 while other sites are saying the median price is about $1.5M!

    https://www.point2homes.com/US/Neighborhood/CA/San-Francisco-Demographics.html

    Something some day will probably disrupt our market, and when that happens the higher the prices have risen the further they are likely to fall. But that’s entirely different than what you’re looking at.

  110. 110
    uwp says:

    By Bubble Trouble @ 103:

    Median HH income in King County: $75K
    Median home price in King County: $586K

    This is not sustainable. Period.

    How does New York do it? How does San Fran? How does San Diego?

    Answer: Have a lot of high income earners and not enough houses for sale.

  111. 111
    Eastsider says:

    RE: uwp @ 110 – NYC/SF/SD don’t have families! Our children will not be able to live here. The high home price to income ratio will squeeze current residents via high property taxes and cost of living. Low income families are forced out of the city. Tent cities are becoming common sight. But this will keep the ratio in check somewhat LOL.

  112. 112
    Brian says:

    By Bubble Trouble @ 107:

    LOL. Yes, I’e heard this rebuttal from used house sellers as well many times. What you fail to mention is that historically the median income to median house price has been 3-4X. When it gets out of wack, prices correct. This isn’t an opinion it’s about 100 years of empirical data. But I know, Seattle is different and stuff.

    I’d say the main reason that 3-4X income number is skewed right now is the historically low mortgage rates, which allow people with lower income to afford a pricier home than they could historically.

    If mortgage rates go up… yikes.

  113. 113

    By Eastsider @ 111:

    RE: uwp @ 110 – NYC/SF/SD don’t have families! Our children will not be able to live here. The high home price to income ratio will squeeze current residents via high property taxes and cost of living. Low income families are forced out of the city. Tent cities are becoming common sight. But this will keep the ratio in check somewhat LOL.

    And again, RE taxes do not rise proportionately with increased values (but Seattle might go up more than other parts of King County, so might rise more than average).

    And you joke about tent cities, but living across from a park or other city land (or a church) is no longer as appealing as it once was. That was a concern on some property a client was buying down in Olympia, and probably much more of a concern in Seattle.

  114. 114
    whatsmyname says:

    By Kary L. Krismer @ 104:

    RE: Bubble Trouble @ 103 – I should just create a Word doc that I can copy and paste from whenever someone compares median income and median price.

    First, not everyone is in the market for buying a house. There are people who make too little money. People who don’t intend to stay in Seattle very long. And also just people who don’t want to buy (including those who already own a house). If you want to look at median income you would need to compare the median income of potential home buyers to the median price.

    Second, even that wouldn’t tell you much because not everyone uses income to buy a house. Wealth is also used, either cash or a large down payment.

    So other than the fact that it’s completely meaningless, the following is a great observation! /sarc

    Median HH income in King County: $75K
    Median home price in King County: $586K

    This is not sustainable. Period.

    http://www.civicdashboards.com/city/seattle-wa-16000US5363000/homeownership_rate

    On top of what you said, Seattle population has increased more than housing, and especially more than single family housing. According to this information, Seattle homeowners are now a minority of households, as homeownership has dropped about 10%, (from 52.2% to 46.6%), in the last 9 years alone. Back in the 90’s, I think the rate was in the 60+% range. That means the median house is going to an ever more restricted cohort of the general population. Do the wealthier go to rentals as quickly as the less wealthy? Maybe, but the potential for pricing off ever higher cohorts is certainly there and certainly possible….. and certainly likely.

  115. 115

    This Tacoma play for Amazon would actually make a lot of sense. The main downside would be an 8.0 earthquake in the region–they wouldn’t have the dual site backup.

    https://www.geekwire.com/2017/seattle-neighbor-tacoma-making-play-amazons-second-headquarters/

  116. 116

    I haven’t had a chance to read this fully, or even note what data NAR is working with, but this seems on first impression to be a slightly better piece on immigration and housing.

    https://www.realtor.com/news/trends/immigrants-homeownership/

  117. 117
    uwp says:

    It will be interesting to see how inventory builds (or doesn’t) this “off-season.”

    A little higher proportionally this week compared to last year (+11% vs +8% in 2016 week over week), although still down 16% YOY.

    Friday’s numbers from the Estately stream will be more relevant to see what goes pending Mon-Wed and what comes on Wed-Fri this week. Especially for everyone who got excited about the Amazon HQ2 news. I love the idea of Tacoma, but I don’t think it fits with AMZN’s goals of diversifying. I think Denver/Austin makes the most sense, particularly Austin. I don’t think it should really matter all that much to Seattle RE right now, but I guess I can see how in the future a new Amazon hire in Seattle might be less likely to buy a house if they thought they might move. Still, though, tons of hires in Seattle and they need to live somewhere.

    Of course, it’s all just a single week in the big picture. You noticing anything on the ground Kary/Ardell?

  118. 118
  119. 119
    Brian says:

    Doesn’t seem like much will happen this week, except maybe less active->pendings.

  120. 120
    Blake says:

    By whatsmyname @ 114:

    Seattle homeowners are now a minority of households, as homeownership has dropped about 10%, (from 52.2% to 46.6%), in the last 9 years alone. Back in the 90’s, I think the rate was in the 60+% range. That means the median house is going to an ever more restricted cohort of the general population.

    This is a key reason prices in some assets can get so high… it’s not a very liquid market. As Kary noted earlier, the “median person” is not a home buyer. And – as also noted earlier – even though AMZ employees are only 1% of our population, they are a disproportionate # of buyers and can drive this illiquid market. As can foreign buyers trying to hide assets in US RE! It is an expensive market and I am glad I am not trying to buy! I feel sorry for the average Joe or a young family trying to start out…

    IF the market suddenly became more liquid – i.e. many more sellers – then we could see prices change quickly. OR… if there were a major recession… But that *almost* never happens and besides… Seattle is special!

  121. 121
    whatsmyname says:

    RE: Blake @ 120 – No, the paragraph you partially quote shows that at least one reason that prices can get so high is growing scarcity. The share of housing available for owner occupancy isn’t what it used to be. That’s just numbers.

    Be fair to Kary. He didn’t say the median income is not a buyer; he said they are not the median buyer – something that should be intuitively obvious by now.

    Let’s do a thought experiment with the numbers you do quote. If you were a person of say, median wealth, in 2008, and every person above you was willing to bid what it takes to get a house; 100% of those people could bid up the houses they want, and about 2% of the local housing units would have been available to you for the same purpose. Today, if your were of median wealth and 86% of those people made the same action, the answer for you would be “sorry, we ran out of houses”.

    Now 86% of those people won’t do that, but the scarcity issue is real,and it is growing.

    What if there are suddenly a lot more sellers? Isn’t this this same question as what if there are suddenly a lot more buyers? It’s true, anything can happen. No one is saying there aren’t risks on both sides – or rather I am not saying that. Recession? Of course. Although after 2008, a lot of people were disappointed at the lack of inventory tsunami, and the Seattle homeowner cohort got 10% smaller. Is there good reason to think Amazon won’t fill their final 2 million square feet? How quickly can they decide, plan, locate, find, tie up surrounding properties, acquire, design, permit and build even the start of a major campus. (Rounding to the nearest 2 years will be close enough for me).

    “Special” is at its heart, a comparative term. I think the fastest growing city in the country has a comparative advantage, which could be even called special. I have a friend who recruits tech. Lot’s of talent wanting to come from the Bay area. A primary driver? Seattle housing prices.

  122. 122

    By whatsmyname @ 121:

    Let’s do a thought experiment with the numbers you do quote. If you were a person of say, median wealth, in 2008, and every person above you was willing to bid what it takes to get a house; 100% of those people could bid up the houses they want, and about 2% of the local housing units would have been available to you for the same purpose. Today, if your were of median wealth and 86% of those people made the same action, the answer for you would be “sorry, we ran out of houses”. .

    That’s an interesting thought, and it would be an interesting world if things worked that way, but they don’t. People worth millions of dollars or who make say over $200,000 a year, they don’t tend to want to live in houses that “only” cost $300,000. They may look exclusively at properties priced over $1M. Then you have other people who probably should be looking under $1M who want the status of living in a certain style home.

    So that leaves a lot of properties available for those under the median buyer income/wealth. But that hardly means things are great or even good for them, because they still face a lot of competition and rising prices. The point is though they are not just left out because they’re at or near the median income/wealth of other buyers.

    So yes, shortages raise prices, but because houses are not fungible there’s still something for those “under the median” buyers. The ones who get totally squeezed out are down at or near the bottom, where either the price becomes more than they can afford or the distance from their desired location becomes too great.

  123. 123
    Blake says:

    RE: whatsmyname @ 121
    I am just making the point that it is a thin market and thus volatile. Look at Tim’s graphs… Inventory is <30% of what it was during the last boom in 2007! And this is reflected in the volatility of the Year to Year % Change – Median SFH Price: Look at the month-to-month changes compared to 2004-2007… looks like an EKG!

    Prices have gotten very high no matter how you look at it, so don't be surprised if we see more volatility in prices… perhaps to the downside!

  124. 124
    Doug says:

    Re: any and all recession comments…

    Every recession in the US has ultimately served as the near term catalyst that kickstarted the disparity-of-wealth-engine during that time period. The most recent recession grew this disparity at a rate greater than any recession before it and set in motion something so nasty and pervasive that I think won’t/can’t be reversed by anything short of a nuclear war.

    With continued advancements in tech and AI that just put more pressure on this disparity, what do people honestly think is going to happen with the next recession? Do you think the Fed isn’t going to immediately drop rates and initiate QE-infinity? Do you think those with the means won’t gobble up assets at distressed prices taking even more supply off the market?

    Sure you might get a short term correction of maybe 10-30% but then what? Prices will double in the following 7 years and make today’s prices look like a fire sale. And so you’re going to try to time that 10-30% correction in a market that includes 6-10% transaction costs? The Fed put is alive and stronger today than ever before in history.

    If you’re bearish and think we’re in a bubble now, the last thing you want is a recession, trust me.

  125. 125
    Blake says:

    RE: Doug @ 124
    Doug… sure the Fed will try Q-infinity, but they are “pushing on a string” now. 10 years ago the discount rate was 5-6% and they cut it to 0.5% in by Dec ’08. Now it’s “up” to 1.5%, so how much affect do you think another drop to .5 or zero will have?
    https://fred.stlouisfed.org/series/INTDSRUSM193N

    Likewise… quantitative easing was a direct intervention in the bond markets to drive interest rates down. They can keep doing that but there is a lower bound! Interest rates are already low.
    Diminishing returns…
    Re: “The Fed put is alive and stronger today than ever before in history.”
    Nope… they are basically out of bullets! Monetary policy can only do so much.

  126. 126
    Bubble Trouble says:

    RE: Doug @ 124

    “Do you think the Fed isn’t going to immediately drop rates and initiate QE-infinity? ”

    Drop rates? In case you haven’t noticed we’re at 0 already. There’s nothing left to drop, unless you envision a time when I buy a new car and the bank pays me interest? I better not give Yellen any ideas.

  127. 127
    Doug says:

    RE: Blake @ 125 – Lower bound? What’s the lower bound? Why do you think there is a lower bound? Don’t you remember this: https://www.ecb.europa.eu/press/pr/date/2014/html/pr140605_3.en.html

    Our 10y is above 2% and 30y mortgage rates around 3.75%! Looks like a lot of room to fall from my perspective. And even after they crush rates the Fed will find other tools to provide liquidity.

    If you’re looking for the great reset, you’re hoping for nuclear war or a natural disaster so large in scale that it wipes a material percentage of the population out. Otherwise it’s going to be business as usual for the money changers.

    Recession –> looser monetary conditions –> greater disparity of wealth –> economic boom –> recession –> wash –> rinse –> repeat.

  128. 128
    Doug says:

    RE: Bubble Trouble @ 126 – I’m not sure why there is this notion of a lower bound? Please explain.

  129. 129
  130. 130

    RE: Ray pepper @ 129 – Wow, Ray, where have you been?

    Also, what’s with the “finally?” Alternative brokerage models have been available for years and years. You of all people should know that.

  131. 131
    Erik says:

    RE: Ray pepper @ 129
    What’s the next play Mr. Peppers?

    I followed your recommendations so far. I gave my old house back to the bank and bought rentals in Seattle at the king county auction like you recommended. What’s next?

    My plan was to keep my best rentals and sell my risky ones. Then I was gonna flip 1 every year while I live in it. Go to the auction, get a good deal, hangout for a year while I make it pretty, then sell it and pay the 15% capital gains tax. Rinse and repeat.

    Am I on the right path? What is the smart money doing right now?

    Any advice would be greatly appreciated.

  132. 132
    uma says:

    RE: Kary L. Krismer @ 24 – What are the chances that a SFH in 1mil price point will appraise lower ? My lender says he has never had a house not appraise.

  133. 133
    Erik says:

    RE: uma @ 132
    I know you’re not asking me, but I’ve had many appraisals. Appraisals are a crap shoot. Your friend got lucky because I’ve had over $100k swings on the same condo by financing through a different broker and getting a new appraisal. I just got my last appraisal changed $35k by challenging it. It should have been changed $120k, but it didn’t matter that much so I accepted the adjusted appraisal.

    Appraisals are a scam so that people can take money from home owners and get paid. The real estate industry is very corrupt and appraisals are another example of that corruption.

  134. 134

    RE: Erik @ 133RE: uma @ 132 – uma, I really doubt your lender has never had a property not appraise, unless maybe they are new in the business or don’t do much business. Lenders don’t control the contract price and they no longer control who the appraiser is. So having not ever had a property not appraise would be a statistical miracle with any volume of business at the lender level. And even if you get to the over $1M market I address next, it’s unlikely a lender would limit themselves to such a market (unless maybe they work for a bank and the bank assigns those out separately, which I’ve never heard of.)

    Erik, again, condos are different because you are more likely to have very close comps which allow fewer adjustments to get to the sales price. On the other side, houses over $1M are much less likely to have nearly identical comps, so the appraiser will have more freedom to select comps. What I haven’t seen a problem with is houses in something like a D.R. Horton development, where there might be two comps of the exact same style of house (but unknown upgrades). I would suspect that would create a situation too, but I just haven’t seen it (yet).

    But just to make this a bit more clear, I’m not saying that the appraisers are trying to get their appraisals to come out to the purchase sale agreement price, unless maybe their comps show a price very close to the sales price. I saying it’s more that they’re afraid of later having to later justify an appraisal of a condo at even $300,000 when two identical units have sold for only $290,000 withing the past three months. There they would be less willing to make that small adjustment to get to the contract price.

  135. 135
    Erik says:

    RE: Kary L. Krismer @ 134
    This was a condo with $100k variation! The first appraiser didn’t look at a neighboring condo with the exact same layout that just sold. Instead he looked at 10 month old comps that were 300 square feet less.

  136. 136

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